[Click eStock] "Kumho Petrochemical, Treasury Stock Cancellation → Value Enhancement... Target Price Maintained"

50% of Treasury Shares to be Cancelled Over Next 3 Years
Q1 Operating Profit Expected at 65 Billion KRW, Up 78% YoY
"Synthetic Rubber Division Also Expected to Improve Performance"

On the 14th, IBK Investment & Securities analyzed Kumho Petrochemical, expecting an improvement in corporate value due to treasury stock cancellation and solid profitability. The investment opinion 'Buy' and the target price of 180,000 KRW were maintained. Kumho Petrochemical's closing price on the previous trading day was 136,700 KRW.

Lee Dong-wook, a researcher at IBK Investment & Securities, stated, "Kumho Petrochemical plans to cancel 50% of its treasury shares between 2024 and 2026, and additionally repurchase and cancel treasury shares worth 50 billion KRW. The reduction in the number of shares is expected to improve corporate value." Kumho Petrochemical decided on the 6th to cancel 2,624,417 common shares, which correspond to 50% of its existing treasury shares, in installments over three years until 2026. Of these, 875,000 shares, which correspond to one-third, are scheduled to be canceled on the 20th.

Kumho Petrochemical's operating profit for the first quarter of this year is expected to be 65 billion KRW, a 78.0% increase compared to the previous quarter. The researcher said, "It is expected to record solid profitability compared to other chemical companies," adding, "Although the synthetic resin and phenol derivative sectors continue to show sluggish performance, one-time costs incurred in the previous quarter are expected to be eliminated."

Due to the rise in prices of crude oil, natural rubber, and butadiene, as well as inventory accumulation demand from downstream tire companies, an improvement in the synthetic rubber sector, including SBR/BR, is also expected. This is because a base effect in terms of volume is anticipated due to regular maintenance of energy facilities in the previous quarter.

The researcher added, "Since the year before last, there has been a slight recovery in the market due to inventory adjustments and rationalization of production facilities by glove manufacturers, and natural rubber prices have been rebounding since the second half of last year," and continued, "Although there is a possibility of some margin erosion in the second quarter due to the recent rise in butadiene prices, the impact will be hedged by increased operating rates of the in-house butadiene plant, price increases of butadiene derivatives, and adjustments in purchase volumes due to planned regular maintenance."

This content was produced with the assistance of AI translation services.